Your Questions About Mortgage Refinancing With Bad Credit

Jenny asks…

Buying a home – Which is better if you have bad credit?

If you have bad credit, and want to buy a home, is it better to purchase a home with a subprime loan, do a lease or rent to own or just rent without committing to buy until you can improve your credit?

John answers:

See if you qualify for an ARM ( adjustable rate mortgage). If you do, buy the house under those terms, improve your credit by making the payments and never be late. The adjustable will change to reflect the current prime lending rate. So, if the lending rate goes up, so does your payment. That is the bad news, but the good news is after a period of 6 months you may qualify to refinance your loan. Check with the state to see what percentage paid into the house you need to qualify. Every state has different rules. Then when you refinance, even if you have to wait for your credit to improve, then go with a fixed rate. This will be the rate that does not change from year to year. The thing to remember is taxes change, if you are not sure about saving for your taxes on your own, you need to set up a escrow account and add the payment into your regular house payment that way you will always have the money and the loan company will pay the taxes out of that escrow account. This is wise for those of us who suck at saving money. Also, roll your insurance payment into that same escrow account and your insurances will also be paid for you when due. You pay a little every month doing this but you do not risk losing your house like I have seen so many people do in the past. Do not rent to own. It does nothing to improve your credit unless you go through an agency or rental company that reports your payments and information to a credit agency. Your down payment will also determine your purchase power and leverage when you apply for a loan. Always go to a lender and get a prequalifacation to see what you may be able to afford. They love to prequalify people because that means the sale of a home will be almost a sure thing for the seller and realtor. There are also many home building companies that will finance terms for people. Another thing to do is check the HUD first time homebuyers program to see if you qualify. The Federal Government set this up for people to make homebuying easier so they could collect more taxes. Isn’t our country wonderful!:) Bottom line: there are many options and do not be sucked in to believing the first thing you hear. Check out your options and take your time. You might be there for a long time and you don’t want to live in something you do not want.

Carol asks…

Is it possible at all to buy a house at some point under my circumstances?

I’m sure I am not alone on this one.
I am not earning a lot, but enough to not get any benefits. I have to rent and am living in a place that is cheap, but it still would be cheaper to pay off a mortgage than paying rent. I have a bad credit history, as my outgoings are higher than what’s coming in at times, but still am not eligible for support. I can’t afford moving and can’t find a cheaper place. I have sold everything that would make me loose money, I don’t go out and save money to pay off my debts (but the interest consumes it so I probably will never get our of them unless I win the lottery). My debt are £10 000 and they are mainly because I lost my job a few years ago and since I have a new one, I am paying to my bank.
I have spoken to credit advisors, the Citizen Advice, but they can’t help me.
Having spoken to them, they calculated that owning a house would actually make me save money, even if there were repairs. It is a mad world.

John answers:

Steps to get yourself out of debt.

1) Take all your credit cards, loans, etc. And lay them out on the table in front of you. Sort them by the interest rates due. Then sort them by the balance due.

2) Look at the total minimum monthly payments you are making on your debt. This number is the amount you must pay every month. Now, add £50 or £100 or whatever amount you can afford on a monthly basis to the total. I recommend £100 minimum, more if you can afford it. You must add *something*. Round the total up to the nearest £10. This number is your Monthly Debt Payment (MDP). It will *never* be smaller (though you can make it bigger if you like!) than it is now.

3) For each card or debt, you are going to pay the minimum. The difference between the total MDP and the minimum payments are all going to go be used to pay one bill. Each month, the minimum payments may get reduced, but you will always be paying your bills with the whole original MDP, not the reduced minimum payments.

4) If there are any you can pay off within three months by making the minimum payments to the others, clear these first. You will feel a great relief getting them off your chest!

5) While you’re paying down this first one, look into personal refinance loans to reduce the higher rates of interest due on some of the debts. If you’re ineligible for loans, then consider switching the balance on high interest cards to a new credit card (cutting up the old one!!!!).

6) Cut up your credit cards! Set up two bank accounts, one for bills (like your debt!) and one for your weekly shop, food, etc. Dole yourself an allowance into the weekly one, and stick to it. Use cash (not a debit card) to pay for your groceries; it will force you to stick to your budget.

7) Once you’ve paid off all the “quickies”, you’ll have fewer minimum payments, which means your extra payment from your MDP are getting bigger and bigger. Use the bigger extra payment on the debt that has the highest interest rate first until it is 100% paid off. As each one is paid off, the minimum payments get smaller and smaller and the extra payments from the MDP get bigger – all using the same total MDP amount each month. As each is paid off, work your way down to the lowest interest rate one.

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Once you’ve paid down your debt, you can then buy a house. The monthly debt payments you’ve been making turn into your monthly savings account for the house. You need a deposit for the house of at least 5%.

Linda asks…

How do I refinance my home with less than good credit?

If I were able to refinance I would get a lower interest rate thus lowering my monthly bill allowing me to pay on time without getting backed up.

John answers:

Some refinances can be done with bad credit still. Usually these are through the FHA.

The best way to find out whether you can refinance or not is by going over your credit report with a loan officer or professional mortgage consultant.

Michael asks…

where can i get a personal loan with really bad credit?

we need to get a loan really soon. my husband is under identity theft and credit is bad. but we need a personal loan. every place denies us. we live in michgan. any good suggestions?
please dont suggest any of those places that give you like $1000 that day. its like a payday advance. i dont want those

John answers:

I you have some assets or a job, you’ll be fine.

There you go: http://simple-credit-cards-and-loans.com

http://index-go.com/debt-consolidation-refinance-loans-mortgage.asp

Lisa asks…

How can I improve my FICI score?

Was able to refinance my house a year and and half ago. My FICO score is 670. I settled with a past due credit card a year ago. Been paying my mortagage regularly. Only have 1 small Sears card with no balance. Tried to increase credit limit (to build credit) but get turned down for bad credit score. How can I improve my score so I can get other credit.
Thanks for your input.

John answers:

If you have no other cards, pay as much as possible to get balance down asap. If there are other cards, make sure that, at least, the minimum is paid to those. I would recommend debt stacking.

Take all your bills that have interest involved with them, including the mortgage. List them in order of highest interest to the lowest interest. To the left of the interest, put the name of the company/card, interest to right, balance to right, minimum payment to right, and what you actually pay in the last column.

Starting with the second highest interest, all the way to the lowest- pay the minimum payment to each of these. For each and every one of these, take the over payment and add it to the actual payment you make on the highest payment. By doing this, you keep paying regular payments to all the other bills, while paying the highest interest off first, regardless of the total amount owed.

Once the first is paid off, roll that entire amount down onto the second highest and keep doing this until all are paid off.

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